With the economy falling deeper into a black hole every day, it's no wonder small employers are dumping their health benefit plans in a desperate attempt to keep from sinking in the storm. This accelerating trend leaves not only uncovered employees in the lurch, but independent agents as well, who often count on group health sales to keep their own firms in the black.
(The New York Times recently ran a piece on this troubling trend, headlined: "Small Payroll, But Big Woes On Insurance." For the complete article, click here.)
Employers are not cutting health benefits with any pleasure. But with the bottom dropping out of the economy, and no clear light at the end of the tunnel, many small firms have no choice but to scale back their insurance costs if they hope to meet their payroll and other expenses.
Independent agents, already hurting from the drop in insurable exposures during this deepening recession, as their clients downsize or go out of business, will feel a double-whammy if their accounts also cut out group benefits.
The best independent agencies today have abandoned a silo mentality and earn significant amounts of revenue from the group market--with the clear leader being health insurance.
Health coverage provided a huge lift for multi-line agencies during the long soft market, as property-casualty commission income fell along with prices. However, there is no soft market for health insurance, with premiums up just about every year--boosting agent commission income significantly.
Agencies are going to have a much harder time making ends meet if clients abandon their group health plans in droves.
Certainly, independent agents can offer their assistance in making the transition by helping individual employees place their own health coverage. But it's a lot easier and cost-effective to sell medical insurance on a group basis.
Besides, with so many people losing their nest eggs in the stock market collapse, and with even their homes at risk, you have to wonder how they possibly could afford to keep health insurance if their employer ends group coverage even if they want it. And how many will be able to get affordable coverage if they have pre-existing conditions?
Independent agents can suggest their commercial clients take steps short of dropping health coverage altogether--either by increasing deductibles for workers, or asking for higher co-payments to lower their premiums. That would still hit agent wallets, as shrinking premiums cut commission income, but it would be better than losing the group health account altogether--for everyone concerned.
However this plays out, inevitably it means millions more may soon fall between the gaping (and widening) cracks in our health care delivery system. President Barack Obama, in his campaign, promised to make coverage more affordable and available, but you have to wonder how he'll pull that off in the midst of the worst economic downturn in decades.
What do you folks think?
